Gold Faces Pressure as Fed Signals Rate Cut While Maintaining Hawkish Stance

XAU/USD retreats toward $4,195 amid conflicting monetary policy signals

Gold price is struggling to maintain ground, trading near the $4,195 level as traders navigate mixed signals from the Federal Reserve. The precious metal’s weakness reflects growing concerns that the US central bank will deliver a “hawkish rate cut” at December’s policy meeting—a scenario that could simultaneously reduce long-term borrowing costs while keeping the USD firm.

Market Expectations: Rate Cut Probability Surges

The probability of a 25 basis point reduction in December has climbed to 90%, a significant jump from November’s 66% estimate according to CME FedWatch data. This shift suggests the Fed is preparing to lower rates, yet the critical question remains: will policymakers adopt a dovish or restrictive tone in their December guidance?

“The market is waiting for the Fed decision and for more guidance on policy,” according to Peter Grant, vice president and senior metals strategist at Zaner Metals. Traders will closely scrutinize the press conference and the Summary of Economic Projections (dot-plot) for any signs of future policy directions. A hawkish narrative despite rate cuts could bolster the US Dollar and consequently weigh on the dollar-denominated commodity.

Employment Data Could Alter the Narrative

Tuesday will bring critical US employment indicators—the ADP Employment Change four-week average and JOLTS Job Openings for September and October. Weaker-than-expected figures could strengthen expectations for deeper rate reductions in the future, potentially providing support for gold by lowering the opportunity cost of holding non-yielding assets. Lower interest rates reduce the attractiveness of yield-bearing investments, making gold more competitive for portfolio allocation.

Geopolitical Backdrop Provides Contrasting Support

Rising tensions between US President Donald Trump and Ukrainian President Volodymyr Zelenskyy add an additional layer of complexity. Escalating geopolitical uncertainty typically boosts demand for traditional safe-haven instruments, which could provide a counterbalance to gold’s current headwinds. This competing dynamic—monetary policy weakness versus safe-haven demand—will likely determine gold’s near-term trajectory.